ShareThisBy JIM DOWNING
Sacramento Bee
Friday, June 08, 2007
It may have been the vigor of his bees or the sunny weather in March, but things went just right for Michael McDonald's almond trees this year.
"Whatever it was, it hit," said McDonald. He raised his long white eyebrows at the green nuts heavy on a branch in his orchard in California's Capay Valley.
"Those things -- they're like grapes on there!" he said.
Around the state, other almond farmers are saying much the same thing. The U.S. Department of Agriculture estimates the California almond harvest will hit 1.31 billion pounds this year, up more than 17 percent from the record 2006 crop.
The huge projected yield is especially surprising since it follows a winter filled with speculation that the year's almond crop would be ruined by "colony collapse disorder," a mysterious condition that was reported to be wiping out the commercial beehives on which almond growers depend for pollination.
Now, growers have the opposite worry: The harvest is likely to be so plentiful that it threatens to drive a price collapse.
"If we had half the crop but twice the price, we'd be just as well off," McDonald said.
For almond marketers like Sacramento-based Blue Diamond Growers, the industry giant, the big crop will be a test of a long-term strategy aimed at building such a strong global demand for almonds that their price will stay stable even when supply skyrockets.
California farmers grow more than 80 percent of the world's almonds, so the harvest here moves the global market. Almonds are California's biggest agricultural export and the state's No. 2 crop overall -- behind grapes -- with farmers receiving $2.34 billion for the nuts in 2005.
The almond harvest runs from early August through September, so the size of this year's harvest won't be known for certain until fall.
Doug Youngdahl, Blue Diamond's chief executive and vice chairman of the Almond Board of California, said the industry has seen the boom in supply coming as better farming practices have improved yields and growers have planted more trees, including more than 200,000 acres in just the past four years. Mature almond trees now cover about 615,000 acres, scattered throughout the Central Valley.
To sell all those almonds, Blue Diamond has been aggressively expanding its retail product line, which accounts for about a quarter of its sales by volume.
The industry also has invested in research to establish the health benefits of almonds, such as their antioxidant properties. The almond board works with chefs, culinary schools and cooking shows and publications to get almonds on as many menus as possible. And California's growing almond production has been promoted in dozens of overseas markets, promising importers and food processors a steady and growing supply of almonds at reasonable prices.
"The answer to California's record crop isn't lower prices, it's better marketing," Youngdahl said.
Still, he said, this year there's likely to be something like a game of chicken between the state's 110-odd almond handlers -- of which Blue Diamond is the largest -- and the big food processors and overseas customers who buy the majority of the crop. Handlers, Youngdahl said, will try to hold on to their supplies until their major buyers agree to pay a decent price.
This year, he's hoping that a patient sales approach will yield prices of better than $2 a pound, roughly what the 2004 and 2006 crops sold for.
But already, said Steve Spellman, director of the T.M. Duche Nut Co., a major nut handler in Orland, some anxious almond brokers have made advance deals for as low as $1.50 a pound.
Those selling early are betting that the price will drop even further, Spellman said, or are worried they won't have adequate storage space for the huge harvest. Speculators around the world are placing bets on which way the almond price will move, he said, and plenty are selling short.
Because of the connection between supply and price, McDonald, who sells most of his nuts through Spellman's firm, has fond memories for one of his worst crops: 2005. Statewide, it was the smallest almond crop in the past five years, but market prices spiked to more than $3.50 a pound, delivering excellent returns to farmers.
McDonald, 63, estimates his costs to produce almonds at somewhere around $1 a pound. He won't know how much he gets for this year's almonds until Spellman's firm executes a deal with a buyer.
(Jim Downing can be reached at jdowning@sacbee.com.)
